As technology companies enter the retail banking space, traditional banks are vulnerable. Dirk Vater, a partner with Bain's Financial Services practice, outlines how banks can respond to this threat by focusing on the customer experience and bringing costs down.

DIRK VATER: Retail banks around the globe are facing a huge threat by big tech companies, like Amazon or Alipay. And it's not just happening in China or in Asia; it's already happening in the US. For example, you can purchase a cab in Las Vegas with Alipay.

Bain's global loyalty report actually shows that banks are vulnerable, because consumers [are open to buying] financial services products from big tech companies. Also, more than a quarter of US respondents would use a voice assistant, like Alexa, to do their daily banking.

And this, of course, challenges traditional banks now, to perform on their digital tools, being their websites, or their apps, or their mobile devices. In comparison to tech companies, the performance and the customer satisfaction with these tools is usually lower. So the entry of big tech companies into the banking space will bring competition to a new level. In order to respond to that threat, banks should focus primarily on their customer orientation, and significantly bring costs down.